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Ohio State University Extension


Living on a Fixed Income

Patricia H. Holmes, Educator, Family and Consumer Sciences, Ohio State University Extension, Montgomery County
Roseanne E. Scammahorn, PhD, Educator, Family and Consumer Sciences, Ohio State University Extension, Darke County
Reviewed by Kellie Lemly Educator, Family and Consumer Sciences, Ohio State University Extension, Champaign County

Living on a fixed income can be challenging, but you can live well without feeling like you must scrimp and penny-pinch by following the steps to a solid financial plan.

Know Your Income

Begin by writing down your sources of income and the amounts you receive on a regular basis. Because Social Security income is paid out monthly, it is easiest to account for monthly income. First, add the net income earned each month from part- or full-time jobs. Next, look at other monthly income such as Social Security benefits, SNAP (food assistance), pensions, alimony, cash assistance, and any regular financial gifts (Green 2018).A retired couple sit on their couch and review their financial plan.

If you have irregular income paid annually or quarterly, such as interest or annuities, plan to set aside these funds for use during lower-income months. If these funds are inconsistent, estimate the amounts on the low side.

Needs Come First, Wants Come Second

Depending on your current situation, your wants and needs will be unique to you and will directly impact your budget. The major factor in getting what you want is knowing the difference between your wants and needs. So, what is a “want,” and what is a “need?”

In general, a need is something you cannot live without. You need shelter, clothing, food, utilities, healthcare, medications, and transportation. A want is something you would like to have but could live without or could substitute with something else. For example, you could substitute a hamburger (need—food) for steak (want). You could also substitute a well-maintained used car (need—transportation) for a new, luxury car (want). Making these choices fulfils your needs at a fraction of the cost.

Budget Carefully

When creating a fixed income budget, start by focusing on needs (shelter, food, healthcare, medications, etc.). Some of these will be fixed expenses (the same amount each month), and some will be variable expenses (amounts that change). To estimate how much to budget for variable expenses, such as a utility bill, use a 12-month average. This is done by adding 12 months together, then dividing the total by 12. Budgeting in this fashion results in extra money some months. This extra money is saved for months when the utility bill is higher than your budgeted amount.

Once you have written down all your monthly expenses, subtract the total amount from your monthly average income. Funds left over can be used for your wants.

Planning for your needs and wants by creating a budget gives you a roadmap that helps you achieve your goals (Hart et al. 2019). Your budget will help you successfully oversee your financial situation while reducing life’s stress and providing peace of mind.

Have an Emergency Fund

An emergency fund is money saved for an unexpected event. Experts recommend that a minimum of $1,000 be set aside for an emergency. They also advise that three to six months of living expenses should be saved for a fully funded emergency account. Therefore, if your basic needs of rent/mortgage, utilities, food, medications, and transportation are $1,000 per month, then your emergency savings goal should be between $3,000– $6,000.

Live Out Your Financial PlanA graphic displaying vegetables as an example of “needs,” and a motorcycle as an example of “wants.”

Put your financial plan in writing. This shows where every dollar goes before your income arrives. It also identifies your spending priorities, so you know your limits. But be open to adjusting your budget as needed until it works for you. Keep what works and adjust what doesn’t. You may have to rewrite your budget a few times to get it right.

Setting short-term and long-term financial goals gives your budget a more meaningful purpose (Green, 2016; Hart et al. 2019). To achieve your goals, you may have to rethink your spending habits. Do you buy because you have a need? Do you shop as a form of entertainment and socializing?

Remember, it is okay to say no to things you’d like, but don’t need, if it’s difficult to pay for your basic needs. Having a budget may help you to say no when it is necessary.

Each person’s financial situation is unique. Do what works for you. Think positively and avoid comparing yourself to others. Be realistic in your choices. What has always been done in the past may not be your best choice for the present. Plan when possible and consider alternative activities—fun things you can do for little or no cost. Perhaps a part-time job or a hobby could bring in extra income?

Your financial plan must be something you can live with on a daily basis. It should be realistic, attainable, and help you live to the best of your ability on a fixed income.


Financial planning should begin as soon as possible. The earlier financial plans are made, the better. Financial planning will not prevent all problems, but it can prevent some and make others easier to deal with.

Ask Yourself These Questions

  • What ways can I find to spend less than my income?
  • Did I plan for emergencies?
  • Are my wants and wishes realistic?
  • What do I need to change?
  • What am I willing to change?

Additional Information

Ohio Department of Aging: (Type “fixed income” in the search box for a list of great resources.)

Area Agencies on Aging by region:

Ohio State University Extension: (Use the “Ask an Expert” link to ask questions regarding fixed income).

Ohio State University, Family and Consumer Sciences: (Click on “Programs,” and then select “Healthy Finances” for a list of helpful classes and tools.)

National Council on Aging. “Becoming ResourceFULL: Savvy Saving Seniors Financial Education."

National Council on Aging. “Money for Older Adults.”


FTC (Federal Trade Commission). n.d. “Making a Budget.” Accessed April 29, 2022.

Green, Rita. 2016. “Steps to Successful Money Management.” Mississippi State University Extension. PDF.

Green, Rita. 2018. “When Your Income Drops.” Mississippi State University Extension. PDF.

Hart, Melanie, Candace Heer, Lauren Jones, Cäezilia Loibl, and Kathy Michelich. 2019. “Manage Your Money, Lessons 1–5.” Ohio State University Extension.

Want more information on how to manage your money? Extension Publishing offers this for-sale publication:
Counting Your Money Calendar

Originally posted May 16, 2022.